A lot of folks hear buzz about "S corporations" and the like and wonder if it makes sense for their business.  But what about LLCs?  LLPs?   LLLPs?  Close Corps?  What does it all mean, and which one makes sense for a small business today?

  Short & sweet, in most cases doing business as a legal entity rather than as a sole proprietor is a very smart move.   Liability insulation means your personal wealth (your house, personal assets, etc.) isn't a target for someone who wants to sue your business (say a disgruntled customer or competitor).  However, keep in mind that if you want to take out loans for a brand new business, the bank will almost certainly expect you to guarantee or assume personal responsibility for repaying the loan.

What's the catch?   Besides drawing up the paperwork to get started, you'll need to follow certain formalities in the running of your business.  Some entities require two sets of taxes - filed both by the entity and by the individual owners.  Maryland requires annual personal property returns.

A Limited Liability Company (or LLC) is created by state statute.  Thus my state of Maryland formed a law which allows folks to use this type of entity for their business.  In many cases, LLCs offer the same protection as incorporating, but don't require all of the formal corporate structure (such as a board of directors)

"S Corps" or "Subchapter S Corporations" don't really refer to the type of entity you form, but rather the way your business is treated and taxed by the IRS.   If you are a small or medium business without many owners, you can often tell the IRS to forget about taxing the corporation and only tax the owners. 

"Close Corporations" limit the number of people who can own part of the business.   Like other corporations, ownership is based on "stock."

Partnerships arise when 2 or more people own a business together.  This may offer much less liability protection.  A number of variations on the partnership theme occur by statute.  For instance, there are LLPs (limited liability partnerships).

You can read up about the different ways you can structure a business (my firm address some of this on its website elawmd.com) or ask a professional for help.  An attorney can give you pros & cons of the different business structures, and an accountant can explain the tax consequences of setting up your business a particular way.  
So what do you need to do yourself?   Be prepared to discuss the following three things about your business:

1)  What you envision your business doing?  (are you running a retail flower shop or buying and selling real estate?)
2)  Who you expect to put up money for the business? (yourself alone, you & your spouse, several friends, etc.)
3)  Who you expect to handle the decision making for the business?